F&G Annuities & Life Highlights Growth Amid Volatility

F&G Annuities & Life Inc ((FG)) has held its Q4 earnings call. Read on for the main highlights of the call.

F&G Annuities & Life Inc.’s latest earnings call struck a cautiously upbeat tone, with management highlighting record assets under management, strong sales, and improving efficiency metrics. While weaker alternative investment returns and earnings volatility risks tempered the narrative, executives argued that the company’s capital strength and shift toward fee-based income support a constructive long-term outlook.

Record AUM and Progress Toward Growth Targets

F&G reported record AUM before flow reinsurance of $73.1 billion, up 12% versus year-end 2024, with retained AUM of $57.6 billion, up 7% over the same period. Since 2020, AUM has climbed from $51 billion to about $73 billion, marking a 44% increase and putting the company close to its five-year goal of 50% growth.

Strong Sales Performance Across the Franchise

Gross sales for fiscal 2025 reached $14.6 billion, the second-highest level in company history, split between $9.0 billion of core products and $5.6 billion of opportunistic sales. In the fourth quarter, F&G generated $3.4 billion in gross sales, including $2.8 billion of core product sales, which represented a robust 27% sequential increase from the third quarter.

Core Product Momentum in Annuities, IUL, and PRT

Core offerings showed healthy momentum, with indexed annuity sales of $6.7 billion for 2025, roughly flat versus 2024 but supported by a 12% year-over-year increase in Q4 to $1.9 billion. Indexed universal life sales rose 14% to $190 million for the year, while pension risk transfer deals delivered $2.1 billion of sales, marking a third consecutive year at or above the $2 billion threshold.

Improving Expense Efficiency Supports Profitability

The company continued to squeeze more profit from each dollar of assets, cutting its operating expense ratio to AUM before flow reinsurance to 50 basis points at year-end 2025 from 60 basis points in 2024. Management reiterated its ambition to reach roughly 45 basis points by year-end 2027, positioning F&G for better operating leverage as the platform scales.

High-Quality Investment Portfolio and Stable Credit Metrics

F&G emphasized the quality of its balance sheet, noting that 97% of retained fixed maturities were investment grade at year-end 2025 and that privately originated assets were about 92% investment grade. Credit-related impairments remained low at 8 basis points for the year, while the fixed income portfolio yielded 4.65% in the fourth quarter, up 6 basis points versus the prior year.

Growing Fee-Based Earnings and Higher-Margin Mix

Fee-based income is becoming a more meaningful earnings driver, with fee income from flow reinsurance rising 37% to $56 million in 2025 and owned distribution margins contributing $47 million, up 2%. These fee-based strategies accounted for roughly 15% of adjusted net earnings in 2025, and management is targeting around 25% by the end of 2028 as it pushes toward a less capital-intensive model.

Solid Adjusted Earnings and Shareholder Capital Returns

Adjusted net earnings reached $482 million for 2025, or $3.64 per share, with fourth-quarter earnings of $123 million, or $0.91 per share. The company returned $137 million of capital to shareholders during the year, raised its quarterly dividend by 14% in the fourth quarter, and reported GAAP common equity excluding AOCI of $6.0 billion, driving book value per share excluding AOCI to $44.43, up 62% since 2020.

Strong Statutory Capital and Deleveraging Path

Capital strength remained a key message, as F&G’s primary operating subsidiary reported an estimated company action level RBC ratio around 430%, comfortably above its 400% target. Management reiterated its aim to keep debt near 25% of capitalization excluding AOCI, with annualized interest expense of roughly $165 million on $2.3 billion of debt, and expects the balance sheet to delever naturally over time.

Strategic Capital Transaction to Recycle and Diversify Risk

Management detailed progress on the sale of Bermuda-based F&G Life Re Limited to Ancient Financial Holdings, a move expected to be effective March 1. The transaction, which has already resulted in the recapture of about $900 million of affiliated statutory liabilities and roughly $300 million in net proceeds including a prior dividend, is designed to diversify capital sources and counterparties for MYGA flow reinsurance.

Alternative Investment Returns Trail Long-Term Targets

A key sore spot in the quarter was alternative investment performance, which produced an annualized return of approximately 7% in Q4 compared with the firm’s 10% long-term expectation. This shortfall translated into a $65 million miss versus management’s Q4 expectations and a $278 million gap for the full year, prompting F&G to reclassify around 60% of its alternative portfolio into fixed income yield for clearer reporting.

Deliberate Decline in MYGA Volumes

Multi-year guaranteed annuity sales fell to $3.8 billion in 2025 from $5.1 billion in 2024, a roughly 25% decline year over year. Management framed this as an intentional choice to moderate MYGA volumes in favor of more attractive capital deployment opportunities and to optimize the mix between retained business and flow reinsurance.

Slight Decline in Net Retained Sales

Net retained sales slipped modestly to $10.0 billion in 2025 from $10.6 billion in 2024, representing a decline of about 5.7% even as overall gross sales remained strong. Fourth-quarter net retained sales were $2.3 billion, down slightly versus the prior year, reflecting the company’s product mix decisions and greater use of reinsurance channels.

Earnings Variability from Surrenders and Prepayments

Management flagged that elevated annuity terminations have been a double-edged sword, boosting earnings through surrender charge income while putting some pressure on interest spreads and introducing potential quarterly volatility. Prepayment fees totaled $56 million for the year, broadly in line with 2024, but executives warned that prepayment trends could become a headwind to earnings in 2026.

One-Time Items and Earnings Impact of the Bermuda Sale

Full-year adjusted net earnings benefited from roughly $30 million of favorable one-time items, which investors will need to strip out to assess run-rate profitability. The sale of the Bermuda entity is expected to reduce AUM by about $1.9 billion and remove approximately $40 million of annual adjusted net earnings, or around $10 million per quarter, until the company redeploys the proceeds into new business or investments.

Perceived Market Valuation Disconnect

Despite stronger fundamentals, management noted that F&G’s shares continue to trade at a steep discount to book value, referring to a valuation near roughly 62 cents on the dollar. Executives attributed much of this disconnect to investor concerns over credit exposure and alternative assets, and suggested that sustained capital strength and improved disclosure might help narrow the gap over time.

Alternative Income Sensitivity to Market Conditions

The company underscored that variable investment income and private asset realizations remain highly sensitive to broader capital markets activity, including IPOs and transaction volumes. With recent private equity realizations described as muted, management signaled a cautious stance in planning assumptions, acknowledging that this drag can influence both earnings levels and capital generation.

Forward Guidance and Strategic Road Map

Looking ahead, F&G reaffirmed its strategy to grow AUM while shifting toward a more fee-based, higher-margin, and less capital-intensive business model, building on the 44% AUM growth already achieved toward a 50% five-year goal. Key targets include lifting fee-based earnings to roughly 25% of adjusted net earnings by 2028, trimming operating expenses to about 45 basis points of AUM by 2027, maintaining RBC comfortably above 400%, managing debt around 25% of capitalization, and using the roughly $300 million of proceeds from its Bermuda transaction to support future growth.

F&G’s earnings call painted the picture of a company balancing strong underlying growth and capital strength against pockets of earnings volatility and a stubborn valuation discount. For investors, the main questions now center on whether management can deliver on its expense, fee-income, and capital deployment goals while proving that weaker alternative returns are a cyclical setback rather than a structural problem.